College Basketball Scandal Spreads To Kansas And NC State

Kansas and North Carolina State have joined Louisville and Miami (FL) in the FBI’s ongoing probe into corruption in college basketball as federal prosecutors in New York added additional criminal counts to the indictment of former Adidas executive Jim Gatto.

Similar to the original indictment that arrived last November concerning Louisville and Miami, the federal indictment released on Tuesday alleges covert payments were made to the families of three high school players to ensure they played for Kansas and NC State.

Each of the four universities are partners with Adidas, and according to Tuesday’s indictment, Gatto, the former head of global sports marketing for basketball for Adidas, “defrauded” the schools by setting up the alleged pay-for-play deals in secret.

Gatto, Adidas consultant Merl Code and an aspiring agent, Christian Dawkins, were among 10 men arrested in late September following the FBI’s investigation into bribes and other corruption in college basketball. They are scheduled to go on trial at U.S. District Court in New York in October.

Along with charges of wire fraud, Gatto, Code and Dawkins now in total face charges of making payments to the families of six student-athletes in order to influence those athletes’ decisions about where they would attend college.

At Kansas, the first allegation listed concerned a player who signed his letter to play for Kansas on Nov. 9, 2016. The unnamed player is reported to be Billy Preston, who committed to Kansas but never played because the school and the N.C.A.A. were investigating him.

Between October 2016 and November 2017, the player’s mother received at least $90,000 from Adidas via an A.A.U. team she ran, prosecutors said. Through three payments from October 2016 through May 2017, Gatto sent the AAU program $210,000, of which specific payments of $30,000, $20,000 and $15,000 were made by an unnamed Adidas consultant to the player’s mother, according to the indictment. The $30,000 payment was made in a New York City hotel room while the $20,000 payment was made in a Las Vegas hotel room.

Gatto generated phony invoices for items, such as a “Basketball Team Tournaments Fee,” to justify the expenditures.

The second player mentioned in the allegations against Kansas committed to the school on Aug. 30, 2017. The only Kansas player who committed on Aug. 30, 2017 player is Silvio De Sousa, who just completed his freshman season at Kansas.

The player had committed to a team sponsored by a rival apparel company, prosecutors said, but preferred to attend Kansas. He had also allegedly already accepted a payment from the other school. On Sept. 11, 2017, Gatto was informed by the unidentified Adidas consultant that he would need to make “another $20,000 payment” to the player’s guardian to help the student-athlete get “out from under” the deal to sign with the other school

De Sousa had been considered likely to attend Maryland, which is sponsored by Under Armour, before committing to Kansas.

The indictment points out that the payments made were “designed to be concealed, including from the NCAA and officials at the University of Kansas, in order for the scheme to succeed.”

Kansas released a statement later Tuesday: “Earlier today, we learned that the University of Kansas is named as a victim in a federal indictment. The indictment does not suggest any wrongdoing by the university, its coaches or its staff. We will cooperate fully with investigators in this matter. Because this is an active investigation, it is not appropriate for us to comment further at this time.”

The allegations related to NC State concern a player who was “widely considered the top high school recruit in the state of North Carolina and who had played for an [Adidas-sponsored] AAU team” to ensure that he signed with the Wolfpack and signed an apparel deal with Adidas once he turned pro. Sources have confirmed that the player is guard Dennis Smith Jr., who was taken ninth overall in last year’s draft by the Dallas Mavericks.

The indictment says the player enrolled at NC State for the 2016-17 season and entered the NBA draft in June 2017.

In 2015, the indictment alleged, an unnamed coach informed an Adidas consultant, who has been identified as T.J. Gassnola, that Smith was wavering on his commitment to attend NC State. According to the indictment, Gatto and the Adidas consultant agreed to pay $40,000 to ensure Smith followed through and played for the Wolfpack. In October 2015, the consultant gave the $40,000 to the coach to give to Smith’s father, Dennis Smith Sr.

The timeline of the allegations would have started during the tenure of former Wolfpack head coach Mark Gottfried, who was fired in February 2017. He was recently hired as the head coach at Cal State-Northridge.

As in other cases, the payment was concealed from NC State officials and the NCAA, according to prosecutors.

NC State released a statement on Tuesday, saying that in September 2017 the school’s compliance staff “contacted former basketball coaches asking whether they had any knowledge of or involvement in any activity related to the allegations coming from the U.S. Attorney’s Office. Former staff questioned stated they had neither any knowledge nor involvement.”

The university’s statement concluded, “NC State will continue to fully cooperate with the U.S. Attorney’s Office and keep the NCAA updated throughout this investigation.”

The superseding indictment released on Tuesday also includes details of schemes to funnel $100,000 to the family of Brian Bowen, a Louisville signee (though the Bowens only received about $25,000) and the family of an unidentified high school player being recruited by Miami.

In a letter to U.S. District Court Judge Lewis A. Kaplan on Tuesday, federal prosecutors said the overall new indictment adds “no additional defendants or legal theories, but expands the scope of the conspiracy alleged” to include alleged payments to the families of student-athletes in connection with their commitments to attend four different universities.

He wrote, “The alleged objects of the conspiracy remain the same, namely, to defraud the victim-universities by (1) causing them to issue athletic scholarships under the false pretense that the student-athletes receiving this athletic based financial aid were eligible to compete in NCAA athletics, and (2) depriving those universities of their right to control their assets while further exposing them to the risk of tangible economic harm in the form of NCAA fines and penalties, among other things.”

Gatto now faces three charges—one count of wire fraud conspiracy and two counts of wire fraud—along with Code and Dawkins. All three individuals have pleaded not guilty.

Gatto has been placed on paid administrative leave by Adidas. Adidas is paying for Gatto’s defense costs. Code, who was based in South Carolina, has left Adidas.

The trial for Gatto, Code and Dawkins is scheduled for October 1. Assistant coaches at Auburn, Oklahoma State, Arizona and Southern California, also charged in connection with allegations that they took payments from an agent and a financial adviser and agreed to steer star athletes their way as clients, are scheduled for separate trials in 2019.

No universities have been charged in connection with the suit, nor has Adidas. Adidas in the fall said it launched an internal investigation following Gatto’s arrest.

In a statement released Tuesday, Adidas said it “is committed to ethical and fair business practices and to full compliance with applicable laws, rules and regulations. We have cooperated fully with the authorities in the course of their investigation and will continue to do so as this case proceeds.”